2019 (1) TMI 5 - AT - Central Excise

Appellant granted exemption for new products under Notification No. 50/2003-CE. Commissioner's denial overturned.

The Tribunal held that the appellant was entitled to exemption under Notification No. 50/2003-CE for new products as the addition of new products did not ... Binding nature of CBEC circulars - addition of new products and plant & machinery during exemption period - continuation of area-based exemption for an eligible unit - requirement of show cause notice before denial of exemptionBinding nature of CBEC circulars - addition of new products and plant & machinery during exemption period - continuation of area-based exemption for an eligible unit - Addition of new products by installing fresh plant and machinery after the cutoff date but during the ten-year exemption period entitles the eligible unit to continue to claim benefit of the area based Notification No. 50/2003-CE dated 10.06.2003. - HELD THAT: - The CBEC Circular No. 939/29/2010 dated 22.12.2010 clarifies that the notifications do not place a bar on addition or modification of plant and machinery or on production of new products by an eligible unit after the cutoff date and during the ten year exemption period. The Tribunal held that the circular is binding on the adjudicating authority and precludes the department from taking a contrary view. Reliance placed on the settled principle that Board circulars, when in force, must be followed by departmental officers. Applying that principle, the items added by the appellant (cosmetics and homeopathic drugs/medicaments) fall within the scope of the exemption for the residual period of entitlement and therefore the appellant is entitled to the exemption for those items during the notified period. [Paras 10, 11, 14, 18]The appellant is entitled to claim exemption for the newly added products under Notification No. 50/2003-CE dated 10.06.2003 for the period w.e.f 04.05.2017 till 22.03.2020.Assessment of factual existence of new unit - requirement of evidence for establishing separate unit - requirement of show cause notice before denial of exemption - The Commissioner's denial of exemption on the ground that a new unit was set up (and that exemption was being improperly continued) was speculative and unsustainable in absence of evidence and without issuance of a show cause notice. - HELD THAT: - The adjudicating authority's conclusion that the appellant had set up a new unit was held to be assumptive and lacking supporting factual verification; the record showed the earlier unit remained in existence and the appellant continued to manufacture the original products. Further, no show cause notice was issued to the appellant before denying exemption to the newly manufactured items, depriving the appellant of an opportunity to rebut the allegations. For these reasons the denial was procedurally and factually unsound. [Paras 15, 16, 17]The Commissioner's order denying exemption on the stated grounds is bad in law and is set aside.Final Conclusion: The impugned order is set aside; the appeal is allowed and the appellant is granted the benefit of Notification No. 50/2003-CE dated 10.06.2003 in respect of the added products (cosmetics and homeopathic drugs/medicaments) w.e.f 04.05.2017 till 22.03.2020, with consequential relief, if any. Issues Involved:1. Entitlement to exemption under Notification No. 50/2003-CE dated 10.06.2003 for new products.2. Validity of the Commissioner’s grounds for denying exemption.3. Applicability and binding nature of CBEC Circulars.4. Jurisdiction and procedural compliance.Issue-wise Detailed Analysis:1. Entitlement to exemption under Notification No. 50/2003-CE dated 10.06.2003 for new products:The appellant sought exemption for new products, namely cosmetics and homeopathic drugs, manufactured after installing fresh plant and machinery. The Tribunal found that the appellant’s unit was already eligible for exemption for existing products under the said notification. The Tribunal emphasized that the addition of new products did not constitute setting up a new unit but was merely an expansion of the existing unit. The Tribunal relied on CBEC Circular No. 939/29/2010 dated 22.12.2010, which clarifies that there is no bar on the addition of new products or modification of plant and machinery for eligible units during the exemption period.2. Validity of the Commissioner’s grounds for denying exemption:The Commissioner denied the exemption on the grounds that the unit did not have a license to manufacture the new products before the cutoff date, that new machinery was installed which was not part of the original unit, and that the existence of the previous unit (M/s RKS Industries) remained separate. The Tribunal refuted these grounds, stating that the addition of new machinery and products was permissible under the notification and circulars. The Tribunal also noted that there was no evidence of establishing a new unit, and the operations were conducted within the same premises.3. Applicability and binding nature of CBEC Circulars:The Tribunal highlighted that CBEC Circular No. 939/29/2010 and Circular No. 960/03/2012 are binding on the Commissioner. These circulars allow eligible units to add new products and machinery without losing the exemption benefit. The Tribunal cited several judicial precedents, including the Hon’ble Punjab and Haryana High Court’s decision in M/s Ambuja Cements Ltd. vs. Union of India, which affirmed the binding nature of such circulars on the Department.4. Jurisdiction and procedural compliance:The Tribunal found that the Commissioner acted without jurisdiction as no show cause notice was issued to the appellant before denying the exemption. This procedural lapse rendered the Commissioner’s order invalid. The Tribunal reiterated that the appellant had followed all necessary procedures and there was no violation of the conditions of the area-based exemption notification.Conclusion:The Tribunal concluded that the appellant is entitled to the benefit of exemption under Notification No. 50/2003-CE dated 10.06.2003 for the new products till 22.03.2020. The Commissioner’s order was set aside, and the appeal was allowed with consequential relief.